Mohamed El-Erian highlights the growing intersection of politics and economics in France following Prime Minister Barnier’s ouster, contrasting the situation with the UK’s ‘Liz Truss moment’. Meanwhile, Greece’s economic resurgence showcases a stark contrast, raising concerns about France’s fiscal future and potential market impacts.
France, despite having Europe’s highest cannabis consumption rate, maintains strict prohibition. With crippling public debt, legalization and taxation are increasingly seen as a potential fiscal lifeline, offering billions in revenue and job creation while potentially reducing crime. However, political delays plague the medical cannabis program, highlighting the complexities of reform.
The International Monetary Fund (IMF) has projected that France will drop out of the world’s top 10 economies by 2029 due to sluggish economic growth. The fund’s latest outlook predicts France’s contribution to global economic growth will decline, with its budget deficit remaining above 4% and public debt exceeding 115% of GDP. In contrast, the UK is expected to become the tenth largest economy while Türkiye is poised to take ninth place.
The French economic landscape presents a mixed picture, with the flash Composite PMI inching up while manufacturing activity declined and services activity expanded slightly in April. Overall, the Composite PMI edged higher to 49.90 points, marking its highest level since May 2023. However, the manufacturing sector saw a downturn, with the PMI declining to 44.90 points. In contrast, the services sector experienced a modest uptick, with the PMI rising to 50.50 points.
